Will the Restructuring at MoSys, Inc. Be Enough for a Rebound?

MoSys, Inc. (NASDAQ: MOSY) is a fabless semiconductor company, who together with its subsidiaries, develops and sells integrated circuits (ICs) for the high-speed networking, communications, storage, and computing markets.

MOSY shares, after a June rebound, had fallen steadily until this week. MOSY shares are up 47% for the week beginning August 21, 2017.

Recent Events:

On June 30, 2017, MOSY announced that it has entered into securities purchase agreements with certain institutional investors providing for the purchase and sale of 1,325,000 shares of common stock at a price of $1.70 per share and warrants to purchase up to 662,500 shares of common stock with an exercise price of $2.35 per share. The warrants will be exercisable six months following the closing date and will expire five years from the date they become exercisable. The gross proceeds of the offering are expected to be approximately $2.25 million. MoSys intends to use the proceeds for working capital and general corporate purposes.

April 12, 2017 the company announced a revision of its operating plan to concentrate resources on the production and sale of its existing products, while significantly limiting new product development and research and development activities. Under the plan, the Company will implement a reduction in workforce of up to 35 positions, or approximately 60% of total headcount. This headcount reduction will be substantially completed in the second quarter of 2017 and take place across all geographic locations. This reduction is intended to lower operating expenses, realign resources, and conserve cash.

In February 2017, the Company effected a 1-for-10 reverse stock split of its common stock. The reverse stock split was intended to increase the per share trading price of the Company’s common stock to satisfy the $1.00 minimum bid price requirement for continued listing on The NASDAQ Capital Market. The reverse stock split reduced the number of outstanding shares of the Company’s common stock from approximately 66 million shares pre-reverse split to approximately 6.6 million shares post-reverse split.

About MoSys:

MoSys, Inc., a fabless semiconductor company, together with its subsidiaries, develops and sells integrated circuits (ICs) for the high-speed networking, communications, storage, and computing markets. It offers Bandwidth Engine, a memory-dominated IC that has been designed to be a companion IC to packet processors; and LineSpeed IC product line, a non-memory, high-speed SerDes I/O device with clock data recovery, gearbox, and retimer functionality, which converts lanes of data received on line cards or by optical modules into various configurations and/or ensure signal integrity. The company serves networking and communications systems original equipment manufacturers. MoSys, Inc. markets and sells its products through sales and marketing personnel, sales representatives, and distributors in North America, Taiwan, Japan, China, rest of Asia, and Europe. The company was founded in 1991 and is headquartered in Santa Clara, California.

MoSys Products:

MoSys Bandwidth Engine® Family of ICs is a memory solution optimized for transaction performance with serial interfaces. The new Bandwidth Engine 3 Devices accelerate EZchip NPS-400 and high-performance FPGAs for Networking, Data Center, and Security Applications. These monolithic devices deliver extreme memory and offload performance without requiring exotic packaging with ultra-dense interconnect or complex cooling solutions associated with multi-chip modules. The underlying performance and features which are common between all part types of the 2nd generation and 3rd generation family are:

High speed serial interface built on CEI standard SerDes and configurable to 16, 8 or 4 lanes depending on the performance required

Bandwidth Engine 3 has a 1152Mb capacity with interface rates over 28Gbps in a 27x27mm BGA package

Bandwidth Engine 2 has a 576Mb capacity with interface rates up to 15.6Gbps in a 19x19mm BGA package

All devices have the performance and flexibility to support a range of unified memory applications within a single device.

The Bandwidth Engine 3 device for EZchip NPS-400 (MSRZ30) is an MSR830 with a GigaChip Interface that is optimized for the data structures and transfer requirements of the EZchip NPS-400 network processor. The addition of the MSRZ30 to the NPS-400 delivers a substantial improvement in memory bandwidth and transaction rate enabling the NPS-400 to increase the packet processing rate.

The NPS-400 can be configured with one or two MSRZ30 devices connected for maximum performance and capacity, or with one or two MSRZ30 that are shared between two NPS-400 to achieve different system level performance points.

Q2 Financial Review:

Total net revenue for the second quarter of 2017 was $1.4 million, compared with $1.2 million for the previous quarter and $1.6 million for the second quarter of 2016. Product revenue for the second quarter was $1.1 million, compared with $1.0 million in the first quarter of 2017 and $1.3 million in the year-ago period.

Gross margin for the second quarter of 2017 was 47 percent, compared with 50 percent for the first quarter of 2017 and 41 percent for the second quarter of 2016.

Total operating expenses on a GAAP basis for the second quarter of 2017 were $4.4 million, compared with $4.8 million for the first quarter of 2017 and $6.5 million for the second quarter of 2016. GAAP net loss for the second quarter of 2017 was $4.0 million, or ($0.60) per share, compared with a net loss of $4.4 million, or ($0.66) per share, for the previous quarter and a net loss of $6.0 million, or ($0.91) per share, for the second quarter of 2016. Non-GAAP net loss for the second quarter of 2017 was $2.8 million, or ($0.42) per share, which excludes restructuring charges, intangible asset amortization and stock-based compensation expenses.

The company has reduced its operating expenses for the 3 months and 6 months ended June 30, 2017, by 31% and 33% respectively, as compared to the same periods in 2016.

Stock Influences and risk factors:

The company has a history of losses and may need to raise additional capital in the future;

MOSY’s success depends upon the networking and communications systems markets’ acceptance of their ICs.;

Revenue depends on winning designs with customers, and those customers designing MOSY solutions into their product offerings and successfully selling and marketing such products.

Stock chart:

Summary:

On August 24, 2017, in intraday trading, MOSY shares were at $1.23 (+29.47%) on trading volume of 6.2 million shares. MOSY shares are trading below their 50-day and 200-day moving averages of #$1.33 and $2.11 respectively.

Traders News Source has not been compensated for this report by anyone and the opinions if any are that of the author Hemal Gandhi, CFA. Author’s Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I, wrote this article myself, and it expresses my own opinions. I have no business relationship with any company whose stock is mentioned in the article.

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